Slovenia prepares two bond issues in 2012 to finance the budget deficit

Slovenia plans an EUR 1.5 billion sovereign bond to part-finance its budget deficit and make a second issue this year, if market conditions are favourable, the country's finance minister said on April 6th, quoted by Reuters.

The first issue, initially expected last week might not be launched until the government finalised a revision to the 2012 budget and found investors for a mandatory capital hike for the country's largest local lender, Nova Ljubljanska Banka (NLB), also said minister Janez Sustersic. According to him, the Slovene parliament should approve about 1.1 billion euros of spending cuts - contributing to a planned narrowing of the budget deficit to 3.5 percent of GDP from 6.4 percent last year - by early May. Slovenia might then also decide to issue a second bond.

Slovenia, which issued two bonds worth a combined 3 billion euros last year, has seen all three major credit agencies cut its debt rating since September, raising the risk premium on its debt. The euro zone minnow is rated A2 by Moody's, A+ by Standard & Poor's and A by Fitch, all with a negative outlook.

According Reuters, Sustersic said the government was talking to possible investors in NLB, which under European Banking Authority requirements needs to boost its capital by 400 million euros by the end of June. The Slovenian government plans to sell more than a half of its 55-percent stake in the bank, in which Belgian banking and insurance group KBC holds 25 percent.

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